Kia O'rana fellow posters (that's Cook Island) for Hello,Whilst...

Kia O'rana fellow posters (that's Cook Island) for Hello,

Whilst I've been sunning myself and relaxing sipping on the cocktails/Coronas by the pool/beach on sunny Rarotonga, I have been pleased to see a number of regulars to this forum getting excited with the action (ASX announcements) over the last few weeks whilst I have been away. In particular special mention and thanks must go to the regulars- Jako, Noellyn, Hermie, Ecca Jojo, JGPM, Thomps? etc and it is good to also see a number of new names of late. Hope those traders hang on for the ride.

I thought I was overdue for a post given my holiday and add my 20 cents to what I think is happening here.

It was interesting the carefully worded statement released to the ASX exchange the other day, regarding those rumours. Hey look....I am a skeptical kinda guy and say under normal circumstances I believe the market is more often than not always on the money.

In my opinion regarding this statement, I believe where there is smoke there is usually fire, and given the clinical nature of the carefully worded announcement this supports, in my opinion, that they (the rumours) are infact to a certain extent true, however only time will tell on this aspect.

I have been digging up some old articles that Michael Anderson has released in the past and believe whilst this is a little old , November 2010 it is from ?The International Resource Journal?it is a great one that best sums up and covers very well just about everything in the current course of play.

It gives a very good coverage to the current options, and adds to the recent debates of Exco's options on this site, and as you can see they are many and varied, hence guys the long delays in a final decision as yet being made.

To those with sweaty palms and anxious for news - Just relax and chill out mate, be patient and you will be rewarded in the long term.

Please enjoy the article.

Cheers Aussie.


The how-to for joint ventures and company-making projects


It?s a fairly auspicious beginning for any miner?kicking off with a portfolio of tenements spun out from mining major BHP Billiton.

But more interesting is what Exco Resources Ltd (EXS), an Australian focused, ASX-listed exploration and mining company headquartered in Perth, has done with this great starting suite since the company was founded in 1998.

?That start has been built upon quite substantially throughout the last four years. We?ve spent a lot of time and money establishing resources and what is now the critical mass for what we see as our flagship copper project,? Michael Anderson, Managing Director says.

?Along the way we?ve added to those tenements and have acquired what we believe to be some of the best ground positions in that part of the world. With the drilling and exploration efforts that we?ve carried out, we now have the critical mass for a stand-alone copper project.?

This project, the Cloncurry Copper project, situated in the famed Cloncurry region of north-west Queensland, continues to be Exco?s prime focus today. Coupled with a later addition, the White Dam Gold Project in South Australia, about 80 kilometres west of Broken Hill in New South Wales, which is now in production and delivering great results, it has been a good year all round for Exco.

Focus and project placement


Anderson says that the rationale for White Dam?s inclusion within the portfolio was to give Exco more portfolio diversity and to create something of a backing for the inevitable cyclicity of base metal markets.

?We got involved in that project in the early 2000s when we got together with the Polymetals Group so that?s been a relationship that goes back some six or seven years,? Anderson explains.

?They were the owner of the White Dam project at the time, then we joint ventured in with them, then we bought them out and then, in what was quite a complicated chain of events, they joint ventured back in with us. We?ve never been too far apart along the way.?

Exco?s timing in entering into this project clearly couldn?t have been better. When the project was opened on Thursday, June 10, 2010, it was the State?s second significant gold mine and fourth gold producing mine.

There have been peak Australian dollar gold prices over the last few years, resulting in some very healthy margins on good production levels over the first few months for the project.

In fact, as of September 20, 2010, production levels measured 30 per cent above target. Anderson says that the transition from explorer to producer was a major milestone for Exco and bodes well as the company looks to do the same with the copper project.

This clear and swift progress stems from the great partnership between owners Exco (75 percent) and Polymetals (25 percent) and the ground work done.

?Polymetals did a fantastic job with the construction and commissioning program so getting to first gold in April was all but a couple of weeks from our targeted timeline. Since then production has well and truly exceeded expectations?not only in terms of the rate at which we?re producing gold,? Anderson says.

?We had a nominal target of about 1,000 ounces per week, 50,000 ounces per annum, and we?re producing more like 1,300 to 1,400 ounces per week?more like 65,000 ounces per annum.?

Those initial targets, complimented by the Australian dollar gold price hovering around A$1,300 with the project modelled on more like A$1,100, has lifted those first few months considerably in terms of production and margin.

?The operation is really stabilizing nicely and that leaves us with one clear challenge?to extend the mine life and see if we can?t enjoy protractive cashflows from White Dam.?

Of course, Exco also differentiates between White Dam and its role as a company starting project, and Cloncurry as a potentially company-making project.

Approaching Cloncurry


Outlining what it is about the copper project that most attracts Exco today, Anderson says that it shapes to be two or three times larger than White Dam both in size and profitability for the company.

?White Dam will contribute to us getting that project into production and within that its importance cannot be underestimated, but Cloncurry is where our primary focus lies,? he says.

?Most of the last year has been focused on advancing the DFS (Definitive Feasibility Study) and the approvals process for that.?

The copper project?s DFS and EIS (Environmental Impact Study) both look set for completion by the year close, in the first quarter of 2011 at the latest. Anderson says that the key for Exco now is to look at its options for project development?to build a standalone operation or to team up with neighbours Xstrata who own the Ernest Henry operation just eight kilometres east.

?We will establish a mine one way or the other, the question is do we build our own new processing facilities or do we make use of Xstrata?s existing infrastructure in that regard,? he says.

?Having progressed the DFS and the EIS through to the point of completion, that?s probably the biggest decision that sits in front of the company and I sense that the market is now waiting for us to clarify that go-forward strategy.?

Exco certainly offers a strong track record in joint venture success. Anderson attributes the success to both parties at White Dam and notes Exco?s largest shareholder, Ivanhoe Australia (23 per cent), of Robert Friedland?s Ivanhoe Mines Group.

?That relationship [with Ivanhoe Australia] is now into its fourth year and they?re also active in our Cloncurry region, so there is certainly potential for ongoing collaboration there,? he says.

?Our most recent moves on the share register have seen a Singaporean company called Sin-Tang Development [Pte Ltd] come into the mix and they, together with their Chinese partners, are keen to see if there are ways for us to collaborate on our copper developments.?

It looks like whether Exco, bolstered by strong shareholders, goes it alone or teams up for another successful partnership, whatever decision the company makes is likely to prove fruitful.

The Exco melting pot and milestones


Exco?s most important announcement going forward looks likely to be its upcoming choice on a go-forward strategy for the Cloncurry Copper project and whether the company will make a mutually acceptable agreement with Xstrata, work with Ivanhoe, or build on the relationship with Sin Tang and their Chinese partners.

?It?s a melting pot bubbling away at the moment and we?re very much focused on finding that definitive way forward and getting that decision out to the market. There is a sense of expectation that it?s coming, but that is matched by our determination to provide that clarity,? Anderson says.

?What we?ve given ourselves is a tremendous platform here. We?ve had a good year and getting White Dam into production was a fantastic milestone for the company, but that is just the start.?

Shaped to enjoy some very healthy cashflows from White Dam on top of what is already a strong financial position, this platform Anderson speaks of is the ideal footing to unlock the value of the copper project. Upon doing so, Anderson says, Exco may be re-rated further and as a result offer new investor attractions.

?When we get to that point we?ll hopefully be re-rated into a mid-tier mining company and again providing ourselves with the opportunity for further growth,? Anderson says.

?That?s not only within the portfolio and organic opportunities with plenty of exploration upside, but also with our heads up looking for opportunities in a corporate or M&A sense.?

The best is clearly yet to come and Exco is perfectly placed to ensure it all goes smoothly. By giving itself every opportunity to maximise that value proposition today, the company is taking those measured steps to make its Cloncurry copper project a production project tomorrow.